Unfinished business in the State House?

By Bob Sanders

Published: January 11, 2013

This is a budget year for the New Hampshire Legislature, but more importantly it's a political swing year, which means there's a new Democratic House and a more closely divided Senate. It also means that there may be some major legislative changes -- other than guns, abortion and grievances -- that could affect Granite State businesses.

It isn't just that Democrats seem intent on reversing some of the changes put forward by very conservative Republicans, mostly from the House, last session. It also means that some Republicans -- either chastened or perhaps emboldened by the change in political mood -- seem to be a bit more willing to look at proposals that might have been unthinkable last year.

Thus we might see some agreement on finding creative solutions on issues ranging from participation in a health insurance exchange to finding ways to fund infrastructure improvements.

TAXES

Rep. Ken Weyler, R-Kingston, former chair of the House Finance Committee, and not shy about expressing his disdain for taxes and fees, plans to introduce a bill that could increase the gasoline tax by a nickel a gallon to help pay for those infrastructure improvements.

The tax would only go up if the price of gas were to fall 50 cents a gallon over a six-month period, said Weyler -- a threshold that might ward off an effort to just raise it.

While a legislator like Weyler proposing to take $40 million out of taxpayers' pockets to fund more government spending seems like a jarring discord, it might be music to the ears of some businesses -- like paving contractors -- who have been hurt by years of a starved government.

"We're trying to make certain to fix the roads," said Weyler, pointing out "a growing number of red-list bridges."

"We've got to do something. The cars are getting more per gallon, so that means there is more wear and tear on the road per gallon," said Weyler.

Cigarette tax

Weyler's blood hasn't turned blue.

He is opposed to reversing the 10-cent decrease in the cigarette tax, echoing the sentiment of the New Hampshire Retail Grocers Association.

Proponents of that decrease said it should have increased cross-border sales during a two-year trial period. That hasn't happened for the most part, aside from an uptick over the last few months.

John Dumais, CEO of the Grocers Association, said the Legislature should not act on any possible cigarette tax cut until that trial period ends in June. Weyler has submitted a bill that would change the interpretation of what would make a successful trial in order to keep the tax cut.

But to Rep. Susan Almy, D-Lebanon -- who chairs the House Ways and Means Committee -- the question isn't whether to reverse the 10-cent cut, but how much to increase cigarette taxes on top of that dime.

The cut "cost us a fair amount of money," she said. "Fortunately it didn't encourage youth smoking, because all the savings generated went to the manufacturers."

However, Almy and Dumais seem to be seeing eye-to-eye on any increase on the beer tax, which has been proposed by Rep. Chuck Weed, D-Keene, who didn't respond to questions about the size and reason for the proposed increase.

Almy pointed out that the state's beer tax is already higher than that in neighboring states, but it remains competitive because other states, which have bottle deposit laws, tack a surcharge on beer sales.

"If we put it up, it would be higher than our neighbors, and that's not a good place to be," Almy said of the tax.

R&D credit

Almy does envision some other changes. She wants to spend $1 million or so more to hire back Department of Revenue Administration auditors whose jobs were eliminated in the last budget. She would also ease up on legislative pressure imposed on the DRA to curb "over-enthusiastic" auditors. The state lost $22 million last fiscal year thanks to such policies, she said.

Many of these audits have to do with "reasonable compensation," the amount a business owner pays him or herself. During the last session, the Legislature exempted the first $75,000 of that compensation from DRA scrutiny. A measure sponsored by Rep. David Hess, R-Merrimack, would increase that safe harbor even more.

"You might as well be telling them they don't have to pay taxes," was Almy's response. "If we give away all of our business taxes, we might as well close up shop and get rid of state government."

That sentiment doesn't bode well for one of the Business and Industry Association of New Hampshire's top priorities -- and the Legislative Service Request with the most signatures -- doubling the research and development tax credit against the business profits tax.

The Senate passed a similar measure last year, but it was caught up in the House, which tacked an anti-abortion bill on the measure at the end of the session, effectively killing the R&D credit.

The bill would raise the total cap for the program from $1 million to $2 million, though it would not change the $50,000 cap for a single company, said BIA vice president David Juvet.

"New Hampshire needs to continue to encourage advanced manufacturing prototype," said Juvet. "A strong economy depends on startups, and this encourages such firms to open up in the state."

Almy isn't on board, however. She said the program is like "picking out winners and losers. My opinion is doubling it is not going to help anything but get a few businesses a few more dollars."

In recognition of Almy's stance, Juvet said that the BIA would be pleased if at least the sunset provision of the current law were eliminated, or at least pushed forward.

All told, at this point there doesn't seem to be any proposal, however, to increase business taxes, but there's not much hope of reducing them either.

Sen. Andy Sanborn, who chairs the Senate Commerce Committee, is sponsoring a bill to reduce both the BPT and the business enterprise tax, but quickly acknowledged that the reduction depends on "whether we have the capacity to do it" and on the "expectation of revenue over the next two years."

And why would a Democratic Legislature reduce business taxes that even Republicans never touched?

"Because I'll ask nicely," Sanborn joked.

While every business group said it would like the government to control spending, most opposed cuts that affect them.

As Mike Somers, president of the New Hampshire Lodging and Restaurant Association, said about the state budget: "Something has to give." But that something shouldn't be the Division of Travel and Tourism Development budget, which is "less of an expense and more of an investment," Somers argued.

On the revenue side, Somers said he is pleased no one is talking about raising the rooms and meals tax, though Sen. Nancy Stiles, R-Hampton, has a proposal that would redistribute the proceeds to municipalities that might raise a few eyebrows.

Her bill would send more money to communities that contribute revenue (such as Hampton and Portsmouth). Currently, 100 percent of distribution is based on population. Her bill would base 56 percent of distribution on population and 44 percent on where the tax is generated.

"While we love our tourism industry, it is currently costing communities on their local tax to support extra police, fire and public works to support tourism," she said.

HEALTH CARE

Last session, the future of the federal Affordable Care Act was as iffy as Obama's re-election.

The state Legislature forbade lawmakers from planning a state-based health insurance exchange. But the alternative -- a federal exchange -- caused some Republicans to oppose the ban, but it passed nevertheless.

This go-round, several bills are being sponsored -- including one from House Commerce Committee Chair Ed Butler, D-Hart's Location -- to reverse that ban.

Everyone agrees that it's too late for a state-based exchange to be set up, at least for the next few years. But in the meantime, the federal government has come up with another alternative: a "partnership" between a state and federal exchange.

The feds will do "some of the heavy lifting," in the words of Deputy Insurance Commissioner Alex Feldvebel, like running the computer system, while the state would do what it has always done -- approve the forms and the rates.

"It's sort of a no-brainer," he said.

The legislative oversight and fiscal committees will still need to weigh in, and the Executive Council still has to approve it, but no further legislation would be required, Feldvebel said.

But Sanborn, over in the Senate, is not sure it's a done deal.

"We never really considered a partnership, so we still have a lot of discussion," he said. He worried that a federal exchange could cost independent insurance agents their job.

The New Hampshire Association of Insurance Agents, however, said that they could sell insurance with or without an exchange.

The concern, said Robert Nash, the association's president, is whether it would be worth their while to do it. That depends whether federal regulations -- not state lawmakers -- classify insurance agents' commission fee as an administrative expense. The ACA limits such expenses, so it could result in fees so small as to be unprofitable.

As for the exchange itself, Nash would like to keep it as local as possible.

"We want to keep the state structure intact," he said. "It's more efficient than dual regulation."

Indeed, the whole state vs. federal debate will come up in an Insurance Department bill sponsored by Donna Schlachman, D-Exeter, which would alter state law to conform to the ACA, when it comes to regulation of the health care plans of the small business and individual markets.

The idea, explained Feldvebel, is that the state can't offer a lesser level of protection than the federal floor. If it did, the feds could wind up regulating that portion of the law itself, creating the same messy dual regulation.

The biggest effect of the ACA will be on the individual market, Feldvebel said. The law requires that insurers accept everybody, doing away with the assigned risk pool. That's great for those in the pool, who are paying an average of 125 percent more than the rest, but it will also mean everybody else's rate will go up.

So House Commerce Chair Butler will be introducing a Department bill will use a reinsurance mechanism, to soften "rate shock", Feldvebel said.

The other major ACA question -- whether to expand Medicaid -- would only affect employers indirectly, because it would theoretically lower health costs through increased competitive care. But for providers it would be a big help, and right now they need all the help they can get.

The hospitals are locked in a fight with the state over Medicaid reimbursement, which in turn has held up the state's effort to institute a Medicaid managed-care program.

"First and foremost is the budget," said Steve Ahnen, president of the New Hampshire Hospital Association. "Medicaid has to be sustainable."

GAMBLING

At deadline, no one knows exactly what kind of casino bill Sens. Chuck Morse, R-Salem, and Lou D'Allesandro, D-Manchester, will come up with. While Gov. Maggie Hassan said during the campaign that she would like to see a casino at one venue -- presumably Rockingham Park -- that would probably lead to the same kind of infighting that helped defeat a gambling bill last year.

"Some people have to put their greed aside for some kind of a compromise," said Rick Newman, general manager of the Lakes Region Casino in Belmont. "The new debate is not that we have gambling, but what kind of gambling. Do we have small operations, or a mega-casino that sucks the energy out of those that invested in charity gaming?

"If I were a betting man," said Newman, "they never will build that $450 million casino. They might promise the Taj Mahal, but what you'll get is a Bangor-style slots parlor."

LABOR

Betting men wouldn't wager on a bill sponsored by Bill O'Brien, R-Mont Vernon. The former House speaker is resurrecting right-to-work legislation, which couldn't get past a GOP-dominated Legislature, despite his best efforts.

"Doesn't seem to be in the cards this session," said Juvet of the BIA, which backs the legislation.

"He is committed to wasting the time of the House," dismissed New Hampshire AFL-CIO President Mark MacKenzie.

MacKenzie said labor interests will be spending much of their time bringing back the state minimum wage, which was eliminated last session, perhaps even increasing it beyond the federal wage.

Also on the labor front, one measure would prevent an employer from asking for an employee's social media password. Other bills would prevent employers from discriminating on the basis of a credit check or the length of previous unemployment.

"I don't think an employer should have access to everything," said MacKenzie. "And I don't think the unemployed, whose credit has deteriorated so, should be denied the opportunity to work."

Rep. Mary Gile, D-Concord, also has put forward a new idea: allowing employers to offer a paid family leave program as a pretax benefit.

California, New Jersey and Rhode Island have similar plans. In New Jersey, it costs $19 a year per employee and that covers partial salary for unpaid leave -- that employers have to offer by law -- to care for an infant after childbirth or a sick relative.

Rappaport said he considers aerial transmission lines for a private company "theft by unauthorized taking" because they impede the view of a neighbor. Besides, putting the lines under an existing right of way would give the revenue to the state, not a private company, he said.

Also, look for some bills relating to the state's Renewable Portfolio Standard. Because those standards are tightening, the state Renewable Energy Fund is getting fatter, making it an inviting target during the next budget season.

Of course, the money could always be used for what it was intended -- funding residential and business renewable energy projects. But don't count on it.

Public Service of New Hampshire is keeping a close eye on specific legislation, but for now it just offered a general response when asked about what bills it's tracking.

"Our focus when considering this legislation is with the potential for unintended consequences of well-meaning bills that end up increasing the costs of energy."

Here are some other bills coming up.

• Cell phone tax: Aside from opposing a sales tax, the big issue for the Retail Merchants this year would be collection of E911 fees on prepaid cell phones at the retail level.

• Gas station generator mandate: The Retail Grocers are concerned about a bill that would require installation of generators at gas stations (to make sure that gas could be pumped during extensive blackouts).

• After hours: There is a bill in that would extend the hours that liquor can be served to 2 a.m. There is another that would eliminate the requirement for a bar to serve food.

• Title loans: House Commerce Chair Butler is sponsoring a bill that would resurrect the cap on title loans at 36 percent, the same cap that is imposed on payday loans.

• Auto dealer bill of rights: Senate Commerce Chair Sanborn has a bill that he said will help dealers when faced with manufacturer-mandated upgrades.

• Prepaid oil regulation: The same bill that passed the Senate last year (but was gutted in the House) would require that fuel oil dealers establish a 75 percent escrow account.

• Medical marijuana: Probably has a better chance of passage compared to legalization or decriminilization and would set up a new industry. The bill Exeter Democrat Schlachman and eight others are sponsoring would set up five nonprofit dispensaries throughout the state.

• Consumer protection: One bill is being sponsored that would give the Attorney General's Office the power to investigate unfair and deceptive practices in regulated industries, like banking, insurance and securities.

Bills to watch in 2013

This article appears in the January 11 2013 issue of New Hampshire Business Review